Hedge Fund

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Hedge Fund
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Member list

• Lam, Ho-kei Jan 023011
• Ng, Lok-hang Jessica 033125
• Chan, Ka-po Kate 033139
• Lee, Tak-ming Alvin 033228
• Wong, Wing-yin Winnie 034025
• Kwan, Cheuk-shing Elvis 035052

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History of Hedge Fund
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History of Hedge Fund

• Hedge ? trying to offset possible losses
• begin in 1949 by Alfred Winslow Jones
• his strategy posted on Fortune
• ? short selling and leverage
• 1952 ? A.W. Jones Co
• ? First Hedge Fund ? continuous profit
• combination of shared risk to ensure goals
• father of hedge fund

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History of Hedge Fund (cont)

• Fail success, quiet hot ? over 2 decades
• Late 1990s
• ? Great development grow rapidly
• Currently, over 6,000 exist in industry
• size at 1 trillion

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Hedge Funds in Hong Kong

• History of hedge funds
• ? relatively short in Hong Kong
• Intended for sale to public
• ? to be authorized by SFC
• ? comply with hedge funds guidelines issued by
  SFC in 2002

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Hedge Funds in Hong Kong (cont)

• First three authorized funds
• ? First quarter of 2003
• ? 2 single hedge funds 1 FHF
• Figures from AisaHedge
• ? first half of 2005
• ? new hedge funds about US 3.5 billions
  established in Asia
• ? 1/3 were entered Hong Kong

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Retail Hedge Fund in Hong Kong
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History
5/2002 SFC released conclusion of consultation on offering of hedge fund to HK public SFC issued long-awaited guidelines permitting offering hedge funds sale to HK public
11/2002 SFC also released the Guidelines on Hedge Funds Reporting Requirements SFC announced authorization of the first 3 hedge funds
2006 13 authorized retail hedge funds ?Matt Dillon is the 13th one
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First Retail Hedge Fund

• Approved by the Special Administrative Regions
  regulator SFC
• Offer to public beyond
• Professionals
• ?fund manager, divisions of banks, insurance
  companies certain pension fund
• Private Placement
• ? limited number of persons

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Changes in Regulations

• Allow fund managers to single strategy hedge
  funds, FoHFs capital-guaranteed hedge funds to
  retail investors
• Minimum subscriptions
• 50,000 for single strategy fund
• 10,000 for FoHFs

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First Retail Hedge Fund (cont)

• Authorization of first 3 hedge funds on
  28/11/2002
• ? 2 single strategy hedge funds
• JF Asia Absolute Return Fund
• JF Greater China Absolute Return Fund
• ?one FoHFs
• HSBC Global Strategy Hedge Fund

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Regulation of Hedge Funds in Hong Kong
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Regulation

• Authorization regime govern by SFC
• Get authorization before selling in the market
• Specific requirements on fund managers
• Minimum purchase amount

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Fund manager

• 4 additional requirements
• Assets under management (AUM)
• Risk management profile
• Internal control system
• Information disclosure

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Fund manager (cont)

• Professional expertise
• 5-year general experience
• 2-year experience in specific hedge fund strategy

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Fund manager (cont)

• Amount of assets under management
• At least US100 million

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Fund manager (cont)

• Risk management and internal control system
• Consider business nature
• Consider business risk
• Set up risk management process
• Monitor the model

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Fund manager (cont)

• Appointments of representatives and agents
• agents involved in the daily operation
• e.g. administrators, custodians, prime brokers
• Sufficient know-how in their own areas
• Provide adequate information and training to
  their selling agents

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Regulatory Parameters
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Regulatory Parameters

• If any company has not complies with the various
  requirements, then
• liable for a fine of up to HK100,000
• If it incurred for matters (e.g. prospectus
  containing an untrue statement )
• Additional penalties (fines of up to HK500,000
  and imprisonment for up to three years)

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Regulatory Parameters (cont)

• Prospectus included
• any prospectus, notice, circular, brochure,
  advertisement, or other document
• offering any shares or debentures of a company to
  the public
• calculated to invite offers

offering any shares or debentures of a company to
the public
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Offer to 'The Public'

• There is an exemption
• exempt from the requirement to prepare and
  register a prospectus
• It is necessary that
• He offer is either not made to 'the public' ,or
• The offer falls within one of the available
  statutory exemptions

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Offer to 'The Public (cont)

• Two available exemptions
• Professionals only
• Private placement

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Six types of Hedge Funds in Hong Kong
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Six Types of Hedge Fund in Hong Kong

• HSBC Global Strategy Hedge-USD
• JF Asia Absolute Return-Notional Class
• AJF Greater China Absolute Return-0301
• JF Japan Absolute Return-0308
• JF Korea Absolute Return-0309
• Man Hedge Diversified Ltd

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HSBC Global Strategy Hedge Fund ??????????

• NAV (2006-03-31) 12.499
• Total Net Assets 17,960 (in thousand)

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Fund performance

• Annual Returns (, USD)
• Growth of 10,000
• 2004 gain 5.16
• 2005gain 8.73
• Now gain 4.24

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Fund fact

• Minimum Purchase(USD )
• Initial Investment
• 10,000
• Additional
• 1,000

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Fund fact(cont)

• Annual Expense
• Mgt Distribution Fee
• 1.65
• Sales Fees
• Initial
• 5.25
• Deferred
• ---

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JF Asia Absolute Return JF??????

• NAV (2006-04-21)
• 44.0127
• Total Net Assets(000's)
• 85,300

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How has this fund performed?

• Annual Returns (, USD) Growth of 10,000
• 2003 27.5
• 2004 -4.13
• 2005 -1.67
• Now 17.93

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Fund fact

• Minimum Purchase(USD )
• Initial Investment
• 50,000
• Annual Expense
• Mgt Distribution Fee
• 1.00
• Sales Fees
• Initial
• 5.00

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JF Japan Absolute Return JF??????

• NAV (2006-04-21)
• 17589.9200
• Total Net Assets(000's)
• 44,905,300

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How has this fund performed?

• Annual Returns (, USD) Growth of 10,000
• 2004 23.86
• 2005 7.13
• Now -1.62

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Fund Fact

• Annual Expense
• Mgt Distribution Fee
• 1.00
• Sales Fees
• Initial
• 5.00
• Deferred
• ---

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Case Study 1HSBC Global Strategy Hedge Fund

• a fund of hedge funds
• a diversified portfolio made up of equity
  long/short hedge funds

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What does this fund own?

• Cash 3.5
• Stock 0
• Bond 0
• Others 96.5

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HSBC Global Strategy Hedge Fund (Cont)

• Inception Date2003-02-28
• Manager Name Team Managed
• Fund Advisor HSBC Republic Investment Limited

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Fund performance

• Annual Returns (, USD)
• Growth of 10,000
• 2004 gain 5.16
• 2005gain 8.73
• Now gain 4.24

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HSBC Global Strategy Hedge Fund (cont)
Fund HSBC Global Strategy Hedge Fund USD Fund HSBC Global Strategy Hedge Fund USD
Benchmark --- Total Return
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How risky is this fund ?

• Worst Quarter Return2.54
• Number of Funds in Category 5 ? diversify risks

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Case Study 2JF Asia Absolute Return - Notional
Class A

• Aggressively managed portfolio of equities, bonds
  and currencies, and derivatives of any of these
• Investing primarily in the Asia-Pacific region
  (including Japan)

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JF Asia Absolute Return - Notional Class A(Cont)

• Inception Date1998-10-30
• Manager Name Victor Lee
• Mgr Start Date 2005-07-18

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How has this fund performed?

• Annual Returns (, USD) Growth of 10,000
• 2003 27.5
• 2004 -4.13
• 2005 -1.67
• Now 17.93

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JF Asia Absolute Return - Notional Class A
(Cont)
Fund HSBC Global Strategy Hedge Fund USD Fund HSBC Global Strategy Hedge Fund USD
Benchmark --- Total Return
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How risky is this fund ?

• Worst Quarter Return 12.34
• Number of Funds in Category 5
• Risk Profile(3-year standard Deviation)